Mesa Reports a Delayed Loss for Its Fiscal Fourth Quarter

You might think that an airline that released a fourth quarter financial report this week was on the early side, but that’s not the case with Mesa Air Group. On the Mesa fiscal calendar, fourth quarter results are from the quarter ending September 30, 2008, so they’re very, very late. And that’s just one of many problems Mesa has faced lately. Their results for the quarter ended in a loss, and while the loss appears smaller than other recent quarters, the news is still not good.

Let’s go down the hitlist of some of the issues facing Mesa right now. Mesa’s 10-K is full of potential bad news down the line:

• Mesa lost $29 million in the fiscal fourth quarter and $5.7 million from continuing operations
• Delta has begun reducing the number of aircraft Mesa flies for them
• Mesa’s big expectations for its Chinese joint venture have fallen flat. They are now working on an agreement to sell their stake in the venture for a measly $4.8 million which requires them to take more than a $1 million loss on the books.
• US Airways has been and is expected to continue to reduce Mesa’s flying. In Mesa’s words, “The US Airways Code-Share Agreement allows US Airways, subject to certain restrictions, to reduce the combined CRJ fleets utilized under the code-share agreement by one aircraft in any six-month period. The Company has received notice of US Airways’ intent to reduce one CRJ-200 in January 2009, one CRJ-200 in July 2009 and one CRJ-200 in January 2010. We anticipate that US Airways will continue to further reduce the number of covered aircraft in accordance with the agreement.”
• More than $100 million in convertible notes may be redeemed in the next month, and they will likely have to issue a massive amount of stock to pay for it if everyone cashes in (they only had $50 million in unrestricted cash and marketable securities at the end of September)
• Mesa’s stock price has been below $1 for a long time, so it faces imminent delisting from NASDAQ
• The airline has been involved in several lawsuits stemming primarily from its Hawaiian operation

While there’s never a good excuse for delaying financial results that I can think of, it’s not a surprise with all these moving parts. There is a lot of uncertainty ahead for Mesa.